Airport Customer Facility Charges: Analysis of Laws, Regulations, and Case Law (2023)

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ACRP LRD 45 9 imposition of CFCs reflect varying degrees of control by the governing body. Some airports may operate in jurisdic- tions where authority is granted by the issuance of an ordi- nance or resolution by their governing body. Others may be granted rulemaking authority to promulgate rules and regulations in order to implement CFCs authorized in such an ordinance or resolution, and others still may be directed or authorized to negotiate and/or enter into contracts with RACs to implement CFCs.65 The specifics will depend greatly on the airport’s jurisdiction, local law, current prac- tices, and other factors. • Limitations in existing RAC agreements. When propos- ing a new charge or financial structuring that affects air- port users, practitioners must be conscious of any existing contractual or other commitments that may govern or limit their proposals. Many airports negotiate new concession agreements at the time they are considering or are about to impose CFCs, which could eliminate this issue. • Limitations from existing bonds. As discussed fur- ther below in Section V.A.4, pledging CFCs in support of municipal bonds is a common scenario with considerable complexity. Airport proprietors considering the imposition of CFCs should carefully review existing bond commit- ments so as to understand whether introducing a new rev- enue stream would impact existing financial commitments or arrangements. In particular, it is important to consider whether CFCs could be considered revenue already pledged under general airport revenue bonds. Once the specific mechanism(s) to establish CFCs is identi- fied, airport proprietors must consider the degree to which an ordinance or resolution will identify the essential characteristics of the CFCs (discussed above and below), as opposed to leaving gaps that may be filled by implementing regulations and/or contractual agreements with RACs and other airport users. This balance is often determined by bond underwriting requirements and the political environment in which the airport operates; for example, an airport proprietor may be granted the authority by its governing board to increase, decrease, or even eliminate and restart the CFC collection within prescribed parameters, while another airport proprietor may be authorized only to imple- 65 See, e.g., Raleigh-Durham Airport Auth. (N.C.), Resolution Enacting an Ordinance to Impose and Collect a Customer Facility Charge (CFC) from Patrons of On-Airport Rental Car Companies and to Provide for the Use of the CFC Funds thereby Collected (March 17, 2016) (resolution passed by the Raleigh-Durham Airport Authority in 2016 establishing CFCs and stating that the airport’s chief executive officer “is authorized to implement and administer the CFC program on behalf of the Authority through inclusion of CFC implementation provisions in concession lease agreements and by other means, includ- ing, without limitation, by adopting rules and regulations to impose the CFC under the authority of this Ordinance, pending the execution of new concession lease agreements by each Airport Rental Car Company and by the Authority”). IV. LOCAL IMPOSITION OF CFCS Because the above-described state statutes are permissive in nature, and the majority of states have not adopted any sort of regulatory framework governing CFCs, the imposition of most CFCs generally occurs at the local level (with the exception of a state-run airport system like Hawaii). As stated above, in jurisdictions where state law does not spe- cifically authorize the imposition of CFCs, airport proprietors typically rely on those state statutes that generally authorize them to charge rentals and fees for the use of airport property or facilities and/or enter into contracts imposing such rentals and fees to impose CFCs.63 The precise mechanism necessary to implement CFCs in these circumstances—by resolution or ordinance, by contractual agreement with the RACs operating at the airport, or, more commonly, a combination of both—may depend on a variety of factors, specific to each jurisdiction. Where CFCs are not specifically authorized under state law, it is critical that practitioners familiarize themselves with local municipal and procedural law. If there is doubt about whether the airport or the local governing body can impose CFCs at all pursuant to state law, there may be tools available to assist in making such a determination.64 Factors that should be considered in evaluating applicable law include the following. • Existing delegated authority. Some airport proprietors have been granted authority to impose rates and charges by their governing bodies (e.g., a city council delegating to the city’s chief executive, or an airport authority to the airport director), and that authority is sufficient to impose CFCs without returning to the governing body for additional, specific legislative action. Airport proprietors should care- fully consider the scope of any delegated authority. • Legislative requirements. Where airport proprietors have not been granted delegated authority to impose CFCs (or state law otherwise requires rates and charges be imposed through consensus among the governing legislative body), the imposition of CFCs may need to be expressly authorized by resolution or ordinance of the governing body. Notably, there may be circumstances where legislative action is desirable even if not legally required; for example, legisla- tive imposition of CFCs may provide stronger assurances to bond underwriters, resolve ambiguities created by state law, or provide for greater degrees of public transparency or control. • Extent of legislative control/mandate. As discussed fur- ther below, resolutions and ordinances authorizing the 63 See, e.g., Ohio Rev. Code § 4582.43; see also Cap. Leasing v. Columbus Mun. Airport Auth., 13 F. Supp. 2d 640, 651 (S.D. Ohio 1998) (referencing such statute when considering concession fees paid by rental car companies and stating that “the Port Authority clearly has the authority to impose ‘rentals or other charges . . . for the use or ser- vices of any port authority facility’ … and no statutory restrictions are imposed on the amount of those charges or the method of calculating those charges”). 64 See infra Section V.A.4.

10 ACRP LRD 45 increase of the CFC amount “to pay for the debt service associ- ated with the Car Rental Building, offices, restrooms, connec- tor tunnel to terminal building and Car Rental Garage.”69 While this apparently allowed BTR more flexibility in programming its CFCs, it also authorized CFCs for general RAC-related use, as a number of other airports allow, unrelated to the particu- lar facility and its associated debt. Though these resolutions do not explicitly address how the mayor-president is to implement and/or increase CFCs, rental car concession agreements at BTR have included contractual provisions that require the collection and specific accounting of CFCs by the RACs. Even if authorized by state and/or local legislation, contrac- tual privity as to the manner of the imposition, use, and collec- tion of CFCs with an airport’s RACs is an important component of the overall legal structure governing CFCs. In most cases, concession agreements between the airport proprietor and the rental car companies will need to address the logistics and parameters of how CFCs will be imposed, collected, remitted, and ultimately used at the airport. While no two concession agreements are exactly the same, their CFC-related provisions often share several key characteristics. • Obligation to collect CFCs on behalf of the airport pro- prietor. Because CFCs are a charge imposed on a RAC’s customer, and not on the RAC itself, it is important to make this clear, including for the reasons discussed below in Section V.B. Given the other fees that RACs may collect from their users which differ in this manner, and the larger financial arrangements between the RACs, the airport, and its customers, contracts often clarify this explicitly. • Agreement that CFCs shall be held in trust for the benefit of the airport proprietor. Agreements should clearly spec- ify CFCs are held in trust for the benefit of the airport pro- prietor.70 To the extent state statutes and local ordinances or resolutions also characterize CFCs in this manner, they should be incorporated specifically into an agreement. Estab lishing a trust bestows the right and duty on the RAC to hold CFCs on behalf of and for the benefit of the airport proprietor, who retains title to the CFCs even while they are in the possession of a RAC. It is critical that prac titioners review the law within their jurisdictions relating to the 69 Greater Baton Rouge Airport Dist. Airport Auth. (La.), Res. 51980 (Feb. 24, 2016) (subsequent resolution passed in 2016 increasing the CFC amount from $4.90 to $6.15 and expanding scope of authorized use). 70 See, e.g., The Port of Portland (Or.), Official Bond Statement – Series 2019 CFC Bonds, App. D at 21 (April 3, 2019) (excerpt from PDX form contractual provision stating that: “Concessionaire agrees that: (a) the CFC is not income, revenue or any other asset to Concessionaire; (b) Concessionaire has no ownership or property interest in the CFC; (c) Concessionaire hereby waives any claim to a possessory or owner- ship interest in the CFC; (d) the CFC shall be the property of the Port and shall be held in trust by Concessionaire for the benefit of the Port; and (e) the Port (or a trustee on its behalf) has complete possessory and ownership rights to the CFC.”). ment a specified CFC amount for a particular project during a limited timeframe.66 The same issue arises with respect to the scope of permissi- ble uses of CFCs. As discussed above, several jurisdictions have adopted CFC-specific legislation that may limit the use of CFCs to particular types of projects. Even within such a framework, locally imposed CFCs may be further restricted by the resolu- tion or ordinances of a governing body, pre-existing contractual agreements with RACs, existing or proposed bond commit- ments, or a combination of all these legal arrangements. As dis- cussed above in Section II, these choices ultimately determine how CFCs will be imposed, collected, treated, and used at each airport. Some airport proprietors elect to impose CFCs through an enabling ordinance for general purposes, granting compara- tively greater discretion to airport executives to manage the use of CFCs over time. For example, Raleigh-Durham Interna- tional Airport (RDU) is owned and operated by the Raleigh- Durham Airport Authority (RDUAA), an authority established by the North Carolina General Assembly to operate, develop, and maintain RDU, whose board is comprised of members from multiple cities and counties. A 2016 ordinance adopted by RDUAA establishes a general CFC at RDU, broadly authoriz- ing RDUAA to use CFCs for purposes related to rental car operations at the airport. While the CFC ordinance clearly sets out parameters for how the CFC should be imposed (e.g., how the funds should be collected and used; the amount of the CFCs; and that RDUAA may change such amount or dis continue it), it also specifically authorizes RDUAA to implement the provisions of the ordinance through inclusion of CFC-related provisions in concession lease agreements.67 Conversely, CFCs may be sanctioned by a local governing body through a narrower grant of authority. The CFCs im- posed at the Baton Rouge Metropolitan Airport (BTR) are an illustrative example. The original 2002 CFC resolution from the Greater Baton Rouge Airport District Airport Authority authorized the airport’s mayor-president to implement CFCs specifically to be used for “payment and retirement of the debt associated with the Phase II Parking Garage Construction costs” at the airport.68 When updated in later years, the CFC-enabling resolution passed by the Airport Authority authorized an 66 See, e.g., Memphis-Shelby Cty. Airport Auth. (Tenn.), Res. 01-4267 (July 19, 2001) (resolution implementing CFC for design and construction of specific consolidated ground transportation center with sunset provision such that authority for CFC would have ended after eighteen months); Memphis-Shelby Cty. Airport Auth. (Tenn.), Res. 09-4485 (Sept. 17, 2009) (subsequent resolution reauthorizing collec- tion of CFCs and expanding use of CFCs to general operational costs associated with rental car operations). 67 Raleigh-Durham Airport Auth. (N.C.), Resolution Enacting an Ordinance to Impose and Collect a Customer Facility Charge (CFC) from Patrons of On-Airport Rental Car Companies and to Provide for the Use of the CFC Funds thereby Collected (March 17, 2016). 68 Greater Baton Rouge Airport Dist. Airport Auth. (La.), Res. 41978 (Aug. 14, 2002) (resolution passed by the Greater Baton Rouge Airport District Airport Authority in 2002 first establishing a CFC of $3.25 per day).